BMI View: Ghana's construction sector will enter a recession in 2015, before a slow recovery from 2016. Mounting headwinds from high inflation, currency weakness, deteriorating fiscal position and the systemic power crisis have converged to place significant downward pressure on construction activity. Toward s the latter end of our forecast (2020-2024) we anticipate strong growth to return as Ghana remains a fundamentally attractive infrastructure market.
Global and domestic pressures are weighing on Ghana's construction sector. Government expenditure has been largely directed to wages over fixed investment, and with a deteriorating fiscal position we do not anticipate an expansion in government infrastructure investment. This situation has only been exacerbated by currency weakness, which has increased the cost of servicing dollar demoninated debt. At the same time, while the government plans a USD1.5bn Eurobond in H215, rising yields will make this more expensive and it could potentially be delayed. Companies are also struggling to sustain activity as the power crisis weighs on productivity and raises costs owing to the need for generators and the cost of building materials: cement companies are struggling to sustain production due to load shedding. Both these factors combined with currency weakness are contributing to soaring inflation - with construction sector inflation hitting 75% in Q115.
With these pressures expected to be sustained in 2016, we have further downgraded growth and now expect a recession in construction industry value (-3%) in 2015 and a slow recovery in 2016 (2.1%).
Despite these headwinds, Ghana remains an attractive market for infrastructure investment. A good pipeline of projects, improving PPP market outlook and strong domestic demand for infrastructure should see sector growth accelerate during 2020-2024, with average real growth of 7.2% anticipated.
Key Trends And Developments
Airports remain a key focus of infrastructure investment plans. In August, the Ghana Airports Company Limited (GACL) secured a USD250mn loan to build Terminal 3 at Kotoka International Airport. GACL is seeking an addition USD150mn for the project. Construction was due to start on the Volta Regional Airport near Ho in April. The project is due to be completed by end-2016. Construction is currently under way at the Tamale Airport, developed as a PPP. Construction is due to be completed in September 2015.
The Ghana Ports and Harbours Authority (GPHA) and Meridian Port Services signed a 35-year concession agreement to invest USD1.5bn expansion of the Tema port in Ghana in June 2015. The project will involve upgrading the port into a multi-purpose facility, which will include four container berths on a 1.4km quay, and developing a 16m draft and a 3.85km breakwater along the dredged port access channel. The project will also involve upgrading the highway between Accra and Tema to a six-lane highway, improving freight transportation. APM Terminals and Bollore Africa Logistics will upgrade the highway. The first phase of the Tema port expansion project is expected to take three years.
A large number of power projects are currently under development and in planning in Ghana as the country grapples with a severe power crisis. Projects across the power mix are being developed. The country's first tidal project is due to be commissioned in December 2016, while a 225MW wind farm is due to be built in 2016. More conventional projects include the Kpone and Takoradi IPPs and hydropower projects.